How to Build an Emergency Fund: Tips and tricks to get you started
One of the most important things that you need to have when planning to buy a home is an emergency fund. What is an emergency fund? It's money that you have set aside to use for unexpected events and circumstances that life throws at you so you won't take a big hit for it and you can still maintain your normal lifestyle. Here are some tips on how you can get started on building your emergency fund.
Don't Get Overwhelmed: Start low on your initial target amount
Setting too high of a goal can easily make you disheartened to continue saving up. Start on a more reasonable amount of just $500 or $1000. That’s a goal that you can reach in just a few months (or even less if you’re in a good income situation) and yet it’s an amount that can make a huge difference when you have an emergency. Having you get to that initial goal will make you feel like you can continue saving up and feel even better about the idea of setting money aside.
What you'd want to do next is to break that goal down into smaller pieces. Set aside money on a weekly basis. This is money that you are not likely to miss, or money that you have extra from cutting back on splurges like lattes and other unnecessary purchases. You'll find yourself with an emergency fund with a bigger amount without you even noticing it. Say you save $25 a week, you will then have a $250 emergency fund in just ten weeks, so you can set that as your overall goal, or increase it to $40 a week, which would bring you to the $500 goal in three months.
Bottomline is, your goal amount should challenge you just a bit, but should not be a number that’s simply unreachable.
Where can you get extra funds?
- Request a rate reduction on your credit cards
If you’re carrying a credit card balance, getting your interest rate reduced will directly save you money each month. Call the number on the back of your credit card, ask to speak to a supervisor, and simply request that the rate be reduced. Suggest that you’re considering transferring your balance off of your credit card. You might also want to consider transferring that balance to a card with no interest for transfers, which can help you pay off that debt faster.
- Make a Shopping List
Make a list before you shop. This is most commonly applicable when going to the grocery. When you go rogue and shop without a list, that is when you typically end up making impulse buys - stuff that you don't actually need and will eventually go to waste.
- Give Up or Transform one splurge per month
Instead of going out for an expensive dinner once a month, turn that dinner into a meal prepared at home. You’ll save more by preparing your own fancy dinner, you get to control the salt, sugar and fat that goes into your food, plus you learn and master new recipes. More feathers on your hat! Instead of going to an expensive coffee shop, why not brew yourself a cup of coffee in the morning, and take another cup with you when you go to work. You'll save more money and rid yourself of the temptation of buying something that's more sugar and whipped cream than real coffee. You could still maybe treat yourself to a cup once a month, if you really miss it.
- Cut back on unnecessary monthly bills
Netflix, web apps and magazine subscriptions? Check if you're really using them. Otherwise, cut them out of your monthly spending budget. Are you paying for premium cable channels that you never watch? Are you subscribed to five monthly subscription boxes but only get good stuff out of two of them? You know what to do.
Speaking of savings, are you saving up in preparation for buying a new home or for relocating? If you’re looking into finding your dream home in Fort McMurray, we’re here to help you out! A few quick links in our search form will get you started!